Income inequality and CO 2 emissions in belt and road initiative countries: the role of democracy.

This paper investigates the interaction effects of income inequality and democracy on CO ₂ emissions. The spatial panel model, which accounts for the spatial spillover effects across countries, is used. Using the panel data covering 41 Belt and Road initiative countries, the results indicate significant positive spatial spillovers effect to country-level CO ₂ emission activity. The Kuznets Curve hypothesis, which assumes that reverse U relation presents between income and CO ₂ emissions, is identified. Empirical results provide evidence that democracy levels promote the nonlinear nexus between income inequality and CO ₂ emissions. High levels of inequality, ceteris paribus, in conjunction with poor democratic institutions are likely to result in higher pollution. The findings are robust to various robustness tests.